Why the debate on unconditional basic income is relevant for Singapore

Technological disruption is expected to cause massive job losses - which is why some European states are debating giving citizens a basic income that can see them through such changes. This may sound extreme to Singaporeans, but the debate highlights the need for social welfare systems to move away from being too dependent on employment.

On Sunday, the Swiss voted against a proposal to give every citizen a basic income, regardless of their wealth or whether they are working.

The proposal was to give a monthly income of 2,500 Swiss francs (S$3,500) to each adult and 625 Swiss francs to each child. The plan was defeated, with 77 per cent opposed to it and 23 per cent backing it.

Despite its defeat, the significance of the referendum - and the idea of a universal basic income (UBI) for all - reverberated across developed countries.

In fact, the Swiss aren't the only ones considering such a universal basic income. The Financial Times (FT) reported: "In countries as diverse as Brazil, Canada, Finland, the Netherlands and India, local and national governments are experimenting with the idea of introducing some form of basic income as they struggle to overhaul inefficient welfare states and manage the social disruption caused by technological change."

 

The thinking goes like this: Robots and tech disrupters will cause jobs to disappear by the millions. Meanwhile, the number of people lucky enough to get full-time paid work that comes with several weeks of vacation leave and medical benefits is likely to diminish. This is because disintermediation platforms like Uber and Task Rabbit, as well as sites that match labour to jobs, see more employers and workers give up full-time work contracts for short-term work on demand.

The rise of this so-called "Gig Economy" can be said to be good for workers in that it offers more of them more flexible work hours.

But it is terrible from a financial and employment security point of view. Such gigs usually don't come with medical leave or healthcare benefits, paid vacation leave or retirement plans. Workers will become more vulnerable, exposed to the vagaries of long spells of joblessness, or illness, and could be left financially desolate in old age. It is against the backdrop of such fears that the idea of an unconditional or universal basic income has arisen.

The Economist, The New York Times and the FT have all reported on this in lengthy features in recent weeks, and traced the intellectual arguments underpinning this seemingly radical idea.


Switzerland went to the polls on Sunday to vote on a proposal to give every citizen an unconditional basic income. Although it was defeated, the proposal has sparked debates across developed countries.  PHOTO: REUTERS

One recent advocate is Mr Robert Reich, a labour secretary in the Clinton administration who teaches at the University of California, Berkeley. The FT reported him as saying the digital revolution was increasing economic insecurity and inequality. The development of car-hailing apps, such as Uber and Lyft, had brought great convenience for consumers but was also creating a "spot auction market" for labour.

The FT report continued: "This insecurity was also fuelling a crisis of aggregate demand in the economy.... A more equal division of the fruits of the technological revolution would revive that demand while providing a broader social good. The aim of all rich societies, Mr Reich said, should be to provide a basic level of subsistence, enabling people to do more of what they wanted and less of what they did not want to do. For all these reasons, he said: I think that UBI is inevitable."

Just as the birth of the industrialised society eventually led governments to create the welfare state, with disability, unemployment and health insurance that protects workers when they can't work, so the birth of today's post-industrial society is seeding debate on how social welfare systems need to change.

CHEAPER THAN WELFARE?

UBI is emerging as a possible system to augment or even replace the welfare state.

In Finland, the social insurance body will pilot a scheme next year, giving up to 180,000 Finns a basic income of €500 to €700 (S$770 to S$1,000) a month - less than the average Finnish income of €2,700.

European cities which have generous welfare systems are keen to try out these pilot schemes to see how people respond to a basic income, and to test if it does not need monitoring and might end up cheaper than a complex conditional system that needs constant monitoring.

We may think that giving a UBI will remove the work ethic. But will it? After all, those on conditional welfare may lose their benefits if they work and start to earn above a certain sum, so they may choose to shun work. But someone with UBI who chooses to work gets to keep all his salary, plus his basic income.

So the effect of a UBI on work motivation is unclear.

In the Netherlands, a complex experiment will begin in Utrecht and several other cities to test out these questions. One group of benefit recipients will remain on the old workfare regime, under which people who live alone get €972.70 and couples €1,389.57.

Another group gets the benefits with no conditions. A third group gets an extra bonus if they do volunteer work. Yet another group is allowed to find work and keep the extra income. How people behave under each scheme is what the authorities want to know.

Opponents say such a UBI will be horrendously expensive. Switzerland's proposed model will cost one-third of GDP, about 13 percentage points more than the 19.4 per cent of GDP it now spends on welfare.

An analysis in The Economist estimates that "a basic income of 15 per cent of average income would require tax revenues of 15 per cent of national income dedicated to it. That is a lot of tax for not much basic income (about US$8,000 in America, in this example)."

HOW ABOUT SINGAPORE?

I read the reports on this issue with great interest, because it signposts the kind of issues we in Singapore will have to grapple with.

To be sure, the idea of a UBI for all citizens sounds rather extreme to me. Most of us who are working don't need it, and may prefer state funds to be concentrated on those who need the help.

But the impetus behind this whole debate is important for Singapore.

Already, the Gig Economy is upon us. Many people are turning to Uber and similar part-time, freelance, portfolio work, rather than going for full-time employment.

As Singapore restructures its economy and embraces robots, autonomous vehicles, Big Data analytics and any number of tech disrupters, the potential for changes to employment is immense. Many people will find themselves out of jobs.

Yet our social security system remains so dependent on full-time employment.

The Central Provident Fund system assumes you have an employer who pays his share of contributions.

Many medical benefits are given by employers, which means workers lose them when they most need them - when they are middle-aged or old, and lose their jobs.

Even the Workfare Income Supplement for low-wage workers presupposes you have a job before it can augment your wages.

In Singapore, if you are jobless for a month or two, hopefully your savings or family or friends can tide you over. You can also get some short-term assistance.

If you are jobless for a year or two years, there is no real safety net for you, beyond that offered by subsidies for retraining. You're lucky if you have a working spouse meanwhile; otherwise you may end up having to think about drastic measures like selling your home and downsizing.

While jobless, you can't get Workfare. Your CPF payments stop. And Singapore has no unemployment benefits.

In Europe, the discussion has advanced to a point where they're talking about a basic income for everyone regardless of need.

Over here in Singapore, we need to start talking, fast, about how to rework our social security systems to protect workers better from the churn and turn of the Gig Economy.


A version of this article appeared in the print edition of The Straits Times on June 07, 2016, with the headline 'Why the debate on unconditional basic income is relevant for S'pore'. Print Edition | Subscribe